Team vs individual incentives? Transparency makes the difference

I’ve recently done some reading resulting in great insights about the power of team-based incentives, and how their power is tied to social proof and a culture of transparency.

In general, research shows that we’re hard-wired to strive more to achieve team objectives than we strive to achieve personal ones. In fact, organizations have a greater performance boost when a team incentive is offered as opposed to an individual one. But this magic only works given certain conditions. We will work harder given the example of our peers; but that depends on making performance information available in a transparent way.
When performance information isn’t transparent, team incentives won’t work.

Since transparency is a great “by-product” of gamification and since gamification should evolve to offer team challenges (encouraging cooperation) and not just individual challenges (emphasizing competition), I thought I’d share what I read.

Team incentives work better and we’re hard wired to take them very very seriously

Most companies and HR practices focus on the personal incentive. Do your work better and get a bonus for yourself. Yet research shows, as Prof. Eyal Winter argues, that team incentives work better.

He uses two great examples to illustrate that we’re hardwired to be more respectful of things that are “dear to my friend than dear to me”. One example is a mother exhorting her husband to drive more carefully when carpooling the neighbor’s kids and not their own kids, saying “Drive Carefully! They are someone else’s kids!” Another is caring more about a parking ticket you’ve caused your friend to receive than a parking ticket received by yourself. Or worrying you will scratch the paint of your friend’s car while not worrying that much about the paint of your own car.

Yet, Prof Winter argues, this basic truth about humans is often ignored when incentives are designed in the workplace. I’d like to add that it is also forgotten when gamification is focused on individual competition rather than team achievement. He says:

“In a 2014 survey of 350 publicly traded U.S. companies, 99 percent of the firms reported using some form of short-term incentive program, but only 28 percent said they use team incentives. Furthermore, 66 percent confessed that they are not even considering this type of incentive program”.

Winter says that team incentives work because we crave social gratitude – social acceptance – and are also motivated by our equivalent fear of social pressure. We don’t want our poor performance noticed or penalized by our peers.

Some examples in Prof Winter’s article are a 14% better performance in a garment factory when team incentives were offered, a 20% increase in academic performance with team incentives and the case of Continental Airlines, which offered employees a mere $ 60 if its airline ranking grew (at a time of exceptionally poor performance), and succeeded in using these team-based incentives to turnaround its poor performance and become a leading airline again.

For team incentives to work, we need transparency and social proof

However, for team incentives to work we need them to work in a transparent environment. This makes sense: how do we know that others are working well if there is no way for us to see them work or for them to see us work? How can the power of social gratitude and fear of social pressure work without the transparency into what others are doing?

If you can’t tell which team member worked hard for success and which team member was actually checking out their social network, the social powers that transform our behavior won’t work.

This brings me to another article by Prof Winter: Transparency among Peers and Incentives. In this article he argues that transparent workplaces influence behavior. For instance, imagine a supermarket checkout line when one cashier can see how her peer is working hard beside her. Then imagine a checkout line where the cashier can’t see her peers. If you introduce a stellar performer into one of the checkout aisles, will they impact how others work? Winter mentions research in a grocery chain where “introducing a highly productive worker into a shift boosts the productivity of incumbent peers who are directly in the line-of-sight of the new worker”.

Winter says that software development teams in joint rooms are “are twice as productive as similar teams working in closed offices” and that “blue-collar workers who work jointly in small teams have a lower absentee rate than other similar workers who work alone”.

In this case, says Winter, seeing your co-worker work “enhances workers’ monitoring opportunities and makes the information about effort more transparent among peers” and adds that “A variety of aspects influence peer information in organizations. One is indeed the workplace architecture, i.e., the extent to which workers operate in the line-of-sight of each other. But the structure of authority and the organizational culture may be equally relevant.” And to this we add just one word: gamification.

Gamification is transparency.

As we’ve written before, one of the by-products of gamification is objective data collection and transparency. Gamification requires the automatic collection of objective data about performance: sales people productivity, customer satisfaction for call center employees etc. The actual collection of the data, the decisions of which KPIs to measure and the consistent measurement have an inherent value – transparency and fairness. Employees are rated based on real, hard data. Employees understand this immediately, and their perception of the data as objective and transparent makes them feel the rules of the game are fair.

Transparency doesn’t mean Orwellian gamification…

“in the basements of the Disneyland and Paradise Pier hotels in Anaheim, big flat-screen monitors hang from the walls in rooms where uniformed crews do laundry. The monitors are like scoreboards, with employees’ work speeds compared to one another. Workers are listed by name, so their colleagues can see who is quickest at loading pillow cases, sheets and other items into a laundry machine… Isabel Barrera, a Disneyland Hotel laundry worker for eight years, began calling the new system the “electronic whip” when it was installed last year. The name has stuck. “I was nervous,” said Barerra, who makes $11.94 an hour, “and felt that I was being controlled even more.”

Gamification should grow up. It’s time for team cooperation. Competition just isn’t enough.

Gamification should grow up and move beyond competition, using the power of team incentives in its favor. Gamification, just like life, is about finding the balance between the individual and the group. Focusing on competition alone sends a signal that caring about how your peers do their job isn’t important.

Effective team incentives are hard to design, admits Prof Winter, but this doesn’t mean that they should be ignored, since they hold the key to organizational success. Employees aren’t automatons that calculate their individual gains of working harder. They are social players with complex moral considerations and a respect for their peers. Cooperation based gamification and team challenges can sometimes address this much better than the simplistic “sales contest”.